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Harper spending spree leaves fed cupboard bare

NDP finance critic Nathan Cullen says he’s concerned about the “very, very expensive” promises the government has booked in the last few months. "They’ll drive us right back into a deficit before even really hitting a surplus," he says.
(Adrian Wyld / THE CANADIAN PRESS)

OTTAWA—After years of struggling to balance Ottawa’s books, Prime Minister Stephen Harper has announced billions of dollars in new spending and tax cuts that will leave the cupboard nearly bare and shape the scope of debate in the next election.

Harper’s spending spree, which will cost the federal treasury more than $30 billion in foregone revenue by 2019, has eaten up the bulk of expected budget surpluses in coming years.

Largely as a result of measures announced since September, federal resources available to pay for possible new programs and tax reductions will be meagre for the next government.

Only eight months ago, the Harper government projected budget surpluses totalling $32.9 billion over the next four years. That has now been cut nearly in half, to $17.1 billion. As for the short term, the February budget said the surplus for 2015 would hit $6.4 billion. But that extra cash has nearly been used up, with the surplus for next year now forecast at $1.6 billion.

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The sharply weaker fiscal outlook is certain to have an impact on how federal political parties develop their campaign platforms for the election expected next October.

This fiscal scenario could, if anything, turn out to be worse. When the benchmark price for U.S. West Texas Intermediate (WTI) crude oil had fallen to $81 (U.S.) per barrel, the federal government calculated the resulting drop in tax revenues would shave $2.5 billion a year off Ottawa’s annual budget surplus. Now that the Organization of the Petroleum Exporting Countries has decided not to cut production to shore up global prices, the WTI price has skidded to the $69 (U.S.) range.

NDP finance critic Nathan Cullen says the Conservatives were wrong to throw open Ottawa’s coffers for “political reasons” in the face of shifting economic conditions.

He said he’s concerned about the “very, very expensive” promises the government has booked in the last few months. The Conservatives were slow to react to the onrushing global recession in 2008 and appear to be doing the same at a time when plummeting crude prices are undercutting Ottawa’s fiscal prospects, he commented.

“At some point, the truth has to hit home,” he told the Star. If the Conservatives don’t readjust, “they’ll drive us right back into a deficit before even really hitting a surplus.”

In September, Finance Minister Joe Oliver unveiled a cut in small businesses’ employment insurance premiums worth $225 million a year. Subsequently, Harper announced a $35-million-a-year enhancement of the Children’s Fitness Tax Credit. And a few weeks later, in another long-awaited fulfilment of promises made during the 2011 election campaign, Harper laid out a package of tax breaks and new spending for families that will cost Ottawa $4.6 billion a year once it is fully implemented in 2015.

The most controversial of these family-oriented measures is the Family Tax Cut, a form of income-splitting for tax purposes worth $2 billion annually. It has attracted criticism because studies show it will benefit only 15 per cent of Canadian families, with high-income earners in a family where one spouse stays home or has a low income getting the largest benefits. The most expensive item in Harper’s package is the $4-billion-a-year increase in the Universal Child Care Benefit. The larger benefits in this family allowance plan begin Jan. 1, but the extra cash for the first six months will be sent out in a single, cumulative cheque that families with children will receive in July, several months before the next election campaign.

On Nov. 24, Harper announced spending on federally owned marine facilities, parks and research centres worth $5.3 billion over the next five years.

With these spending and tax-cut measures in place, federal policy-makers will be facing some tough choices, TD Bank senior economist Randall Bartlett says.

He said that, at current world oil prices, the predicted 2015 budget surplus will be reduced by another $1.5 billion, which means next year’s surplus could come in at a mere $100 million.

Any further deterioration in the fiscal picture could force the government to use part of its $3 billion rainy day fund to keep from winding up with a budget deficit in 2015.

“If you have a surplus of $100 million, it’s not really much room to do anything,” Barlett remarked.

This could hem in NDP leader Thomas Mulcair, who has promised if elected to power to work with the provinces on a child care plan that will cost Ottawa several billion dollars a year once implemented. And a Liberal government under Justin Trudeau would be looking for federal financial resources in hopes of boosting the economy by increasing investments in roads, bridges, transit and other infrastructure projects.

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